Well. Some right and some wrong from both sides. American Samurai has a point about "the Illustrated sourcebook," but he still makes a few incorrect points.
The Edo period did support a flourishing of arts, sciences, and featured a rather effective early modern "police state." It is important to remember, however, that the feudal system was still firmly in place. The shogunate's power (especially towards the end of the period) was always somewhat shaky in the southern/western provinces-- Satsuma and Choshu han are of course the most notable. Even during the Edo period proper, the Daiymo still had most of the say over the laws within their own domains, as long as they kept up their respects to the Shogun. Nazi Germany it was not. It's important not to anachronistically place forms of government that were not and could not be implemented at the time. The Shogun exercised an impressive level of control for sure, but it was hardly at the level of really any modern nation-state.
As to the "lessening of warrior skills..." They changed, certainly. Perhaps American Samurai is objecting to the negative connotation of the characterization, but read, say,
Katsu Kokichi's autobiography. He was a sword seller, a street thug, constantly in debt, and never really held a government post. Not to say that he represents all samurai of the era, but as a class of people they certainly did not have the same experience nor prowess with warfare that their ancestors hundreds of years prior had. Sword schools flourished, but they were for recreation, fame, and street fights rather than military academies. It's a little hard to say that the existence of an effective police force means that they didn't lose any military skill--how would you fancy an engagement between your local beat cops and the Navy SEALs? Moreover, most Samurai that weren't busy brawling and gambling HAD transitioned into a bureaucratic role. It's nothing to be ashamed of, perhaps, but you can't deny that they spent far more time learning to manage a household or a province than an army.
Also, as to the merchants.. American Samurai, sorry, you're incorrect here. You call out everyone else, correctly, on blanket-statementing 250 years of history, then promptly do it yourself. As time went on and the economy flourished under the excellent administration of the Bakufu, Japan slowly transitioned from a rice-based agricultural economy to a monetary one. The Samurai certainly didn't like it--look at the sumptuary laws frequently passed in the 1700s for examples of how the merchants would constantly attempt to flaunt their wealth while the Samurai attempted to suppress it to maintain their prestige. Also note the story of the 47 Ronin with the merchant they can't do it without but can't quite include.
The fact was that Samurai stipends, and the Bakufu's national budget, was collected entirely in rice. Rice which increasingly, to be worth anything, had to be changed into money. This was only done through the merchants, who became rich off the exchange. Speculation before the harvests often ran rampant, and could lead to dangerous asset bubbles (sound familiar? 2008 wasn't so new after all...). A Samurai's "fixed" stipend of 400 Koku could mean radically different incomes at market value year to year. Look in the early 1800s, there's at least one rice riot in Osaka (the location of the largest rice markets) due to speculation, or read the multiple edicts published over the years forgiving the debt that lower-ranking Samurai had run themselves into simply by maintaining their lifestyle on an agricultural stipend in a monetary economy. The Shogunate, steeped in Confucian, agrarian fundamentals, refused to change with the economy. It's one of the many reasons that, Perry or no, the Tokugawas were headed towards a crisis in the 1850s. There's also a reason the Boshin war was so short and one-sided. The shogunate as an institution did a fantastic job of maintaining peace and order for 250 years, but that was about as far as it was going to go.
Back to the original topic of the thread, mostly yes. "Bushido" was invented by the bureaucrats rhapsodizing on how glorious it would be to die for their lord in battle, then turning back to their desks and filling out the 17th century equivalent of a TPS report (did seee the memo, mori?), and by the heads of clans trying to control their warriors. Calling them indolent is a bit unfair, especially in the immediate years after unification. Still, though, the Sengoku was a period of brutal dishonor, betrayal, rapid social mobility, and lawlessness. There were no codes, there was only the dead and the living (at the risk of being overly poetic). "The Japanese people as a country (itself a totally anachronistic term)" may have been happy that the warfare was over. Well, honestly, in the case of some peasants, the Sengoku might have been preferable--sure there's a pretty good chance you get killed, but consider that if Toyotomi Hideyoshi had been born again 60 years later into the same kind of family, he would simply have toiled the land in back-breaking labor all his life rather than living his final years in untold opulence in control of the realm. As for the samurai and the merchants, take the briefest glance at Edo period theater, poetry, art, or literature and tell me they didn't fetishize warfare just as much as we in the west do now.
For someone harping on the necessity of research, American Samurai, you seem to have done precious little of it.